January 12, 2012

Pointing to a potential decrease in global supply and higher implied demand, a bullish set of corn reports is expected by investment bank Morgan Stanley from USDA on Thursday (Jan 12).

The USDA will publish its Quarterly Stocks and its World Agricultural Demand and Supply Estimates reports at 0830 AM EST Thursday.

Dry and hot weather in Argentina brought by weather phenomenon La Nina is likely to encourage the USDA to lower its production forecast at the South American country from the current 29 million tonnes, Morgan Stanley said.

"We have lowered our estimate to 25.5 million tonnes with risks skewed to the downside if drought persists," the bank said in a research note to investors.

Lower Argentinean production should also cause export estimates to fall to 18.3 million tonnes from the current USDA projection of 20 million tonnes, Morgan Stanley added.

Feed and residual corn demand might also see an increase of as much as 350 million bushels from a last USDA estimate of 4.6 billion bushels.

Regarding corn demand for ethanol production, the bank claims "that the expiration of the US$0.45/gal VEETC [tax credit on December 31] and the prospect of slow 1Q export demand will limit any upward revisions to ethanol estimates," it said.